Securitization, Regulation and Factors Contributing to Financial Crisis

Securitization, Regulation and Factors Contributing to Financial Crisis Essay example
Masters
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Finance & Accounting
Pages 4 (1004 words)
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Securitization, regulation, and factors contributing to the financial crisis Introduction Regulations and threats are some of the factors in a business environment and they play a major role in the financial sector that is sensitive to consumers’ interest and offers diversified and sensitive risks…

Introduction

This paper reviews the current financial crisis with focus on securitization, causes of the crisis, current regulatory framework and the scope of Basel Committee and proposes possible measures regulating the financial sector. The process of securitization and its significance Securitization refers to the transfer of assets from an entity, the originator, to another entity that is set for such purchases with the aim of increasing the generator’s liquidity level. The generator, a financial institution, sells its debt assets to the third party who in turn, provides agreed amount of cash in exchange. The process of securitization incorporates a number of stakeholders. It begins with the financial institution that wishes to securitize its assets. The originator offers its assets to an issuer that must be an established entity for such a purpose and the issuer obtains rights over the assets. The issuer is further a native organization and acquires rights of the assets. Fundamental to the securitization process is the special purpose vehicle concept that transfers possession of the subject properties from the originator to the issuer and safeguards the issuer’s right over the property should the originator be declared bankrupt. ...
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